The walloping that media stocks took in the summer was an “overreaction” that has created opportunities for investors. That’s the view of John Malone, who spoke Thursday at the investor conference that his Liberty Media and Liberty Interactive banners hosted in Manhattan.
During the closing Q&A of the six-hour presentation, Malone was pressed about his long-term plan for Lionsgate, which he addressed only briefly and vaguely.
“We don’t rule anything out,” he said when asked if he intended to expand his interest in the studio. At the same time, he and Liberty CEO Greg Maffei noted that his companies have only ever lost money by going into the movie business, most recently when Starz owned Overture Films. “We lost more money there than on anything else we did,” Maffei said.
Malone is one of the industry’s most widely admired investors and thinkers. He cited the summer’s media stock bloodbath when asked what has surprised him in the volatile media business landscape during the past year.
Malone referenced the quick dive that shares of all major media conglomerates took last August after Disney CEO Bob Iger acknowledged on an earnings call that ESPN was facing traditional MVPD subscriber losses in the coming years.
“The overreaction of the market kind of surprised me,” Malone said. “Like anything else it creates opportunity. If things get mispriced, that’s opportunity for investors.”
Malone called the ESPN disclosure “old news” and noted that ESPN’s high carriage fee has made sub losses “more pointed” for the sports powerhouse. Because of that high price, operators who have the ability to create smaller channel packages — aka skinny bundles — have incentive to leave ESPN out of some offerings to keep pricing lower and appeal to non-sports buffs.
In another Q&A later in the day, Malone was asked about his regrets as an investor. Among them, he noted, was “not going hostile on Netflix when we identified it as undervalued” some years ago, he said. Maffei said at the time Liberty was the parent of Starz, and going after Netflix would have likely complicated Starz’ relations with MVPDs.
“The cable guys hated Netflix. We didn’t want to throw Starz under the bus,” Maffei said, adding: “We could have flushed Starz, with all due respect.”
Malone also noted that he once tried to talk DirecTV, which was controlled by Liberty from 2006 to 2009, into buying Netflix.
At the earlier Q&A, Malone flagged the shifts in the advertising market as the biggest question mark on the near-term horizon for media.
“To me the biggest issue is advertising — and what migration takes place in terms of advertising dollars” as viewing patterns change, he said.
“Clearly there’s a shift to some degree,” he said. “Everybody I know on the media side is experimenting in short-form to (reach) millennials. “The mix of how they’re going to consume programming is something we’re all studying.”
Malone cited his adult son as an example of someone who didn’t own a TV set for years but has recently acquired a large-screen TV.
“To some degree it’s an age and social relationship kind of thing,” he said. “Clearly video is a very important part of people’s lives. Everybody in social networks is trying to figure out to integrate video in their social network offering because it has glue.”